Professional Documents
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Describe Midland, its capital planning model and Janet Mortensen's role in the case.
Briefly explain the meaning of the following concepts: cost of capital, WACC, and CAPM.
Address what you use cost of capital to evaluate. How are Mortensens estimates used at
Midland?
Compute Midlands Corporate WACC. Be prepared to defend it and to discuss cost of debt and cost
of equity.
Answer: should Midland compute different WACC for each division? Why or why not?
Answer: if you were to compute a WACC for each division, how can we get asset betas for
divisions? How should comps be selected?
Calculate the WACC for the Petrochemicals Division. Think of the same issues you considered for
the Corporate WACC.